On March 10, 2005, the Securities and Exchange Commission (SEC)
approved on a pilot basis new NASD Rule 4400A, which gives NASD
the authority to receive and review complaints against NASD Market
Participants alleging denial of access to their quotations in the
Alternative Display Facility (ADF). In addition, the rule sets forth
procedures for reviewing such complaints and delegates authority
to NASD's Market Regulation Committee (MRC) to review denial of
access determinations rendered in accordance with Rule 4400A. The
new rule can be found in Attachment A and becomes effective on
May 26, 2005.

Questions/Further Information

Questions or comments concerning this Notice may be directed to
Chris Stone, Associate Chief Counsel, Transparency Services, at (202)
728-8457; or Philip Shaikun, Associate General Counsel, Regulatory
Policy and Oversight, at (202) 728-8451.

Background and Discussion

On July 24, 2002, the SEC approved SR-NASD-2002-97, which authorized NASD to
operate the ADF on a pilot basis for nine months.1 The pilot has since been extended
until July 26, 2005.2 The ADF is a quotation collection, trade comparison, and trade
reporting facility developed by NASD in accordance with the SEC's SuperMontage
Approval Order3 and in conjunction with NASDAQ's proposal to register as a national
securities exchange.4

The ADF does not provide an order routing capability; therefore, NASD Rule 4300A
requires an NASD Market Participant to provide direct electronic access to other NASD
Market Participants and to provide all other NASD members direct electronic access or
allow for indirect electronic access to its quotations in the ADF.

The rule change gives NASD the authority to receive and review complaints against an
NASD Market Participant alleging denial of direct or indirect access required by NASD
Rule 4300A. The rule change does not include complaints that allege: (1) a denial of
direct or indirect access because of non-payment of fees for access to an NASD Market
Participant's quotations that are imposed by the NASD Market Participant in accordance
with SEC rules and regulations or otherwise; or (2) a specific instance or group of
instances over discrete time periods where an NASD Market Participant is alleged not to
have not honored its quotation in accordance with applicable SEC and NASD rules with
respect to orders received electronically pursuant to NASD Rule 4300A.

The process under Rule 4400A for a proper denial of access complaint is as follows: The
complainant is required to file a written complaint with ADF Operations via facsimile,
personal delivery, courier, or overnight mail that specifically alleges denial of access to
an NASD Market Participant's quotation. The complainant is required to serve a copy of
the complaint by the same means on the opposite party in accordance with NASD Rule 9134(b).

An officer designated by a President of NASD or one of its divisions then reviews the
denial of access complaint to make a determination on the merits of the complaint. The
officer may, at his or her discretion, conduct further investigation before rendering a
decision as to whether there has been a denial of access in contravention of Rule 4300A. In the event that the officer determines that there has been such a denial of
access, he or she will direct the offending party to provide access to its ADF quotes and
may limit participation in the ADF by such party if it does not comply promptly with the
directive to provide access. The directive and any action to limit participation in the
ADF will become effective and remain in place during the pendency of any further
review or appeal.

The rule change also provides for a review of the initial determination by a three-member
subcommittee consisting of current or former MRC members. A party seeking
such review is required to submit a written appeal to NASD by the close of business on
the next business day after receipt of the initial determination and to simultaneously
serve a copy of the written appeal to the opposite party. The party seeking review is
accorded twenty-four (24) hours, or a longer period determined by NASD staff, after
submission of the appeal to provide to NASD and the opposing party any supporting
written information concerning the appeal. The opposing party then has the same
amount of time to submit written documentation in support of its position. A threemember
subcommittee of current or former MRC members will then render a final
determination to affirm or reverse the determination of the NASD officer based on the
record and any hearing it determines to hold in its discretion.

The rule requires the MRC subcommittee to provide written notification of its decision
by the close of business the day following its determination. The decision, including
affirmation of any directive to provide access or action to limit participation in the ADF
rendered by the NASD officer, is effective upon issuance of the written decision and
remains in effect during the pendency of further appeals or other legal proceedings.
The MRC subcommittee may not impose any additional sanctions, including monetary
fines; its authority is limited to affirming or reversing the determination of the NASD
officer.

The MRC decision constitutes final NASD action and can be appealed to the SEC. The
decision does not prejudice the rights of the parties to subsequently submit the matter
to arbitration or another adjudicatory forum as appropriate. Furthermore, the decision
does not operate as an estoppel or otherwise bind NASD in any subsequent disciplinary
action or other legal proceeding.

The pilot rule will remain in effect for the duration of the ADF pilot, absent any
additional rulemaking action by NASD.

(1) For the purposes of this Rule, a "direct or indirect access complaint" is a complaint against
an NASD Market Participant, as defined in Rule 4300A(d)(4), that alleges a denial or limitation of access in contravention of Rule 4300A.

(2) Any member that wishes to file a direct or indirect access complaint shall submit a written
complaint, via facsimile, personal delivery, courier or overnight mail, to ADF Operations and simultaneously
serve by the same means the respondent in accordance with Rule 9134(b). Officers of NASD designated by
a President of NASD or one of its divisions shall have the authority to review and make a determination
regarding direct or indirect access complaints.

(3) Based upon a review of the complaint and such investigation that the officer, in his or her sole
discretion, may decide to conduct, the officer shall promptly determine whether there has been a denial of
access by the NASD Market Participant. If the officer determines that there has been a denial of access in
contravention of Rule 4300A, the officer shall direct the offending party to provide access to its ADF quotes
and may limit participation in the ADF by such party if it does not comply promptly with the directive. NASD
shall provide to the parties written notification of the determination by the close of business following the
day the determination is rendered. The determination shall be sent to the facsimile number listed in the
parties' contact questionnaire submitted to NASD pursuant to Article IV, Section 3 of NASD's By-Laws or
another contact specifically designated by a party. The determination, and any directive to provide access
or action to limit participation in the ADF, shall be effective when issued or as specified, and shall remain in
effect during any review or appeal. The determination shall not constitute an estoppel as to NASD nor bind
NASD in any subsequent administrative, civil, or disciplinary proceeding.

(b) Procedures for Review of Determinations

(1) Any member that seeks review of a determination issued pursuant to paragraph (a) hereof, shall
submit a written appeal setting forth the grounds for such review. The written appeal shall be submitted
via facsimile, personal delivery, courier or overnight mail, to NASD and served by the same means on the
opposite party, in accordance with Rule 9134(b), by close of the next business day after receipt of the
written determination. Written appeals that are not served upon NASD and the opposite party by the close
of the next business day after receipt of the written determination will not qualify for further administrative
consideration, without prejudice as to the rights of a party to submit the dispute to arbitration or another
adjudicatory forum.

(2) Once a written appeal has been received in accordance with subparagraph (b)(1) above:

(A) the party seeking review shall have up to twenty-four (24) hours, or such longer period
as specified by NASD staff, to submit to NASD and the opposite party via facsimile, personal
delivery, courier or overnight mail, any supporting written information concerning the appeal;

(B) after receipt of the foregoing supporting written information, the party served with the
appeal shall have up to twenty-four (24) hours, or such longer period as specified by NASD staff, to
submit any relevant written information to NASD and the party seeking review via facsimile,
personal delivery, courier or overnight mail;

(C) if the party seeking review fails to serve the opposite party any written information
required pursuant to this subparagraph, that party's written complaint will not qualify for further
administrative consideration, without prejudice as to the rights of a party to submit the dispute to
arbitration or another adjudicatory forum.

(3) Each member and/or person associated with a member involved in the review shall provide
NASD with any information that it requests to resolve the matter on a timely basis notwithstanding the
time parameters set forth in paragraph (b)(2) above.

(4) All requests for information pursuant to this rule shall be sent by the specified means to a
receiving location that, from time to time, may be designated by NASD.

(c) Review by a Subcommittee of the Market Regulation Committee

(1) If a party has applied for review of a determination, and the procedural requirements of
subparagraph (b) above have been satisfied, the determination shall be reviewed and a decision rendered
by a three-member subcommittee comprised of current or former industry members of NASD's Market
Regulation Committee. Upon consideration of the record, and after such hearings as it may in its discretion
order, the subcommittee, in accordance with the requirements set forth in Rule 4300A, shall affirm or
reverse the determination of the NASD officer pursuant to paragraph (a)(3) above.

(2) The subcommittee shall provide written notification of its determination to the parties by the
close of business following the day the determination is rendered. The subcommittee's determination shall
not prejudice the rights of a party to submit the dispute to arbitration or another adjudicatory forum. The
subcommittee's determination, including affirmation of any directive or action rendered in accordance with
paragraph (a)(3), shall be effective when issued or as specified, constitute final NASD action, and remain in
effect during any review or appeal. The subcommittee's determination shall not constitute an estoppel as to
NASD nor bind NASD in any subsequent administrative, civil, or disciplinary proceeding.